Shell, ICG win battle for Meridian Energy’s Australian power, renewable assets
Shell and its consortium partner Infrastructure Capital Group have paid $729m for Meridian Energy’s Australian business.
Energy giant Shell and its consortium partner Infrastructure Capital Group have won the battle for Meridian Energy’s Australian business, further boosting Shell’s clout in the local retail electricity market in a challenge to the big three power players.
As foreshadowed by The Australian on Sunday, Shell has paid $729m to scoop up Meridian’s highly prized retail business, Powershop Australia, which delivers electricity to 140,000 customers and gas to 40,000 accounts.
The move effectively kickstarts Shell’s long planned assault on Australia’s retail power market with Powershop to form Shell’s residential power platform in Australia, in addition to its existing focus on commercial and industrial customers.
“Our aim is to become a leading provider of clean power-as-a-service and this acquisition broadens our customer portfolio in Australia to include households,” said Shell’s Executive Vice President of Renewables and Energy Solutions Elisabeth Brinton.
ICG will take control of Meridian’s generation assets including 294MW of renewable generation capacity and 150MW of renewable development opportunities. It will gain ownership of Meridian‘s Mt Mercer and Mt Millar wind farms in Victoria and South Australia respectively along with the Burrinjuck and Keepit hydro stations, both in NSW.
Shell said it had also struck supply offtake agreements with ICG for its wind and hydro assets and said the acquisition of Powershop was in line with Shell’s Powering Progress strategy and ambition to create an integrated power business.
“This acquisition is another example of how we are continuing to grow our footprint in Australia to meet customers’ evolving needs through the energy transition. Powershop today offers innovative energy packages, and customers will benefit in the future from access to Shell’s broader suite of energy solutions linked to e-mobility and battery storage,” said Shell Australia chairman Tony Nunan.
For Shell, the buyout will act as a fresh springboard for it to build a sizeable presence in Australia’s retail electricity market, challenging the big three of AGL Energy, Energy Australia and Origin Energy, which was an early participant in the Meridian auction.
The Big 3 hold large retail market shares in many states and control more than 60 per cent of capacity in NSW, Victoria and South Australia.
While Shell is best known for oil and gas, it has identified Australia as one of six target markets where it will look to create an integrated electricity supply business with the potential to scoop up a “mass market” customer base through dealmaking.
Its outgoing global head of gas and renewable energy, Maarten Wetselaar, last month said it wanted to expand its clout in Australia and build its business further after its $620m takeover of the Trevor St Baker-backed ERM Power.
Shell has said its power business will achieve equity returns of 8-12 per cent, compared with 12-15 per cent for its legacy oil and gas business.
Shell is one of the dominant players in Australia’s booming energy sector, operating the QCLNG export plant in Queensland, the Prelude floating LNG project off northern Australia along with stakes in Western Australia’s North West Shelf, Gorgon and Browse LNG ventures and gas business Arrow.
The deal is subject to Shell receiving foreign investment approval from the Australian government and is expected to be finalised in the first half of 2022.
Meridian said it will consider its capital structure and reinvestment of the proceeds once a deal is finalised.
The duo fended off competition from Italy’s Enel and Spain’s Iberdrola, both significant energy operators in their own right. The assets also drew interest from telco Telstra, power giant Engie and fuel retailer Ampol.
A deal was announced on Monday morning by Meridian, which has been advised by Lazard and is dual-listed on the ASX and New Zealand bourse. ICG is an infrastructure investment manager owning existing renewable assets in Australia and with $2.8bn of equity under management.
The energy major was forced to write off $US6.2bn from its Australian operations for the 2020 financial year after the price of crude plummeted to a two-decade low last year. That sparked an overall loss of $US4.9bn compared with a $US661m loss a year earlier.
While the annual results do not represent Shell’s total earnings performance in Australia, the records reflect its acquisition of ERM and revenues from stakes in North West Shelf, Gorgon and Prelude LNG projects along with its 50 per cent interest in Arrow Energy.
Meridian generates more than a third of NZ’s electricity. It was one of three companies formed from the break-up of the government’s Electricity Corp of New Zealand.
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